Rethinking Scrappage For Addressing Vehicle Emissions

Scrappage schemes are controversial. In a 2011 academic paper* reviewing 26 studies assessing the outcomes of 18 scrappage schemes implemented around the world in 2008-11, the authors concluded that the emission effects of the schemes were ‘modest and occur within the short term.’ They also concluded that the cost-effectiveness of such schemes ‘is often quite poor.’

The reality of the 2008-9 scrappage schemes, however, was that governments in Europe, the US and Japan were tackling a liquidity gap by stimulating consumption and bolstering an ailing car industry. The mooted environmental benefits of accelerated fleet renewal were talked up by politicians but were not the main objective. This helps to explain why the efficiency of the schemes in mitigating Greenhouse Gas (GHG) emissions – CO2 dominating discussion at the time – was found to be poor value for the taxpayer and of marginal consequence to overall path reductions towards a low carbon economy.

Since 2008-9, the policy climate has changed significantly, with air quality emerging as a major concern. Several national governments have been sued by environmental groups for illegal levels of NOx in cities, and what was once a transport policy issue has become a matter of public health. With diesel bans looming in city centres, plus the advent of clean air zones, it’s no stunt to reimagine scrappage according to an emission-reduction imperative.

Data availability upon which to base an intelligent scrappage scheme has also improved. Since 2011 Emissions Analytics has compiled the world’s largest database (the EQUA Index) of standardised real-world emissions tests, of over 2000 cars. The EQUA Index test measures not just CO2 emissions but nitrogen dioxide (NO2) and carbon monoxide (CO), as well as fuel efficiency.

Reimagining scrappage in light of air quality first requires accepting that the now discredited New European Driving Cycle (NEDC) test regime has produced counterintuitive outcomes, to the point where some of the newest cars are by no means the cleanest. This means that a poorly designed scrappage scheme could produce a worse outcome, measured in air quality, than doing nothing at all.

The EQUA Index results show that:

Dirtiest Euro 6 diesels are 6-7 times worse than cleanest Euro 5
Dirtiest Euro 6 diesels are up to 3 times worse than cleanest Euro 3/4
Some 20-year-old cars are cleaner than some brand new cars

How one weights GHG emissions against NOx emissions is a matter of policy debate and public acceptance, but a plausible objective would be Pareto optimality, or the idea that addressing air quality should not be at the expense of GHG such as CO2. While research points towards life cycle or ‘well to wheel’ analysis of CO2 emissions, this is difficult to measure and for the sake of a near-term scrappage scheme probably lies in the future.

Beyond the well-observed conflict between efficiency, where diesel scores well compared to gasoline, and the point-of-use emissions, where gasoline is consistently cleaner with respect to certain emissions such as nitrogen dioxide, the point to make is that it is possible to target and scrap dirty cars without increasing CO2.

The EQUA Index test recently revealed that 11 Euro 6 diesel cars from four manufacturers merited an A+ rating, equivalent to 0.06 g/km NOx in the EQUA Index test, which compares with a limit 180% higher (0.168 g/km NOx) for the new RDE requirement that will prevail until January 2021. Such cars can be said to be genuinely clean by today’s standards, but were greatly outnumbered by highly polluting diesel models, 38 of which scored F, G or H, meaning that they exceeded the Euro 6 limit in respect of NOx by 6-15 times. By comparison, 105 gasoline and hybrid Euro 6 cars achieved the A+ rating, and only one gasoline model fell into the D category, the rest being C or higher.

In the graph above, the arrow labelled ‘Bad Trade’ travels from a Euro 4, 1.9-litre diesel Skoda Octavia, model year 2009, that scored E in the EQUA Index test, towards a Euro 6, 1.6 litre diesel Nissan Qashqai, model year 2016, that scored H in the EQUA Index test. The Skoda is cleaner than the Nissan in real-world testing, yet a scrappage scheme designed around vehicle age alone could result in the cleaner Skoda being scrapped for purchase of an equivalent, dirtier Nissan Qashqai. This would result in tailpipe emissions higher by a factor of more than five and therefore worse air quality. It would be a waste of tax payer money.

Conversely the ‘Good Trade’ arrow highlights that dirty older (and conceivably newer) vehicles could be scrapped for genuinely cleaner new vehicles. Currently, 87% of Euro 6 diesel cars are over the Euro 6 limit, as are all Euro 5 cars. If all these cars were replaced by Euro 6 cars actually performing to the Euro 6 diesel standard in real-world conditions, the net tailpipe emissions improvement measured in NOx would be around 88% from the Euro 5/6 fleet. If real-world performance were only brought down to the Euro 5 diesel standard, the reduction in emissions would be 74%. Even if performance were reduced to just Euro 3 levels, there would still be a 38% reduction.

Put another way, as most Euro 5 and 6 diesels emit over the limit, a large number of vehicles need to be “fixed” to address the air quality problem. This inherently makes any scrappage scheme highly costly. Therefore, a more stratified approach may be optimal, as shown in the chart above. Emerging passenger car retrofit technology may deliver a 25% or more reduction in NOx; those vehicles with moderately high emissions could be tackled in that way. A scrappage scheme could then be targeted on the dirtiest diesels (perhaps worse than the Euro 3 level in real-world).

A further potential ‘Bad Trade’ may be switching from a diesel car to a non-hybridised gasoline car. The same vehicles viewed through the lens of CO2 emissions show that on average, gasoline vehicles are, like-for-like, a ratings class worse than diesels for absolute CO2 emissions. They also exhibit a greater disparity between NEDC measurements and actual emissions. For example, the 2017 Audi Q2 diesel, achieves A+ for air quality and C2 for CO2. The same power output gasoline equivalent model from the same year also achieves A+ for air quality, but a lower D4 for CO2. C means 150-175g/km CO2; D means 175-200 g/km, but the numbers 2 and 4 respectively show that the gasoline engine model is at greater variance from the officially claimed figures. This example highlights an element of the trade-off involved if tackling air quality results in a more gasoline-dominant fleet.

In summary, the right scrappage and retrofit schemes could incentivise consumers towards vehicles that are genuinely clean and genuinely efficient, taking into account not just NOx emissions, but also CO2 and particulates. This would contrast with the UK’s 2009 scheme that merely required customers to scrap their old car for any new vehicle. A stratified and discriminating scheme would require a more focussed replacement, resulting in better results both for air quality and climate change.